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description: "A bullish capital-gain strategy (bull call spread financed by a short OTM put) selling an OTM put at K1, buying an ATM call at K2, and selling an OTM call at K3, ideally structured at zero cost."
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tags: [options, speculation, bullish, seagull]
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# Bullish Short Seagull Spread
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**Section**: 2.54 | **Asset Class**: Options | **Type**: Speculation
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## Overview
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The bullish short seagull spread is a bull call spread financed with a sale of an OTM put option. It amounts to a short position in an OTM put at K1, a long position in an ATM call at K2, and a short position in an OTM call at K3 (K1 < K2 < K3). Ideally, the trade is structured to have zero cost. The trader's outlook is bullish. This is a capital gain strategy.
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## Construction
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- Sell 1 OTM put option at strike K1 (lowest)
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- Buy 1 ATM call option at strike K2 (middle)
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- Sell 1 OTM call option at strike K3 (highest, K3 > K2 > K1)
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- All same expiry; ideally zero net premium (H = 0)
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Net debit or credit H
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## Payoff Profile
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f_T = -(K1 - S_T)+ + (S_T - K2)+ - (S_T - K3)+ - H
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Breakeven depends on sign of H:
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- S* = K2 + H (if H > 0)
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- S* = K1 + H (if H < 0)
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- K1 <= S* <= K2 (if H = 0)
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- Max profit: P_max = K3 - K2 - H (if S_T >= K3; bull call spread at max)
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- Max loss: L_max = K1 + H (if stock goes to zero; full loss on short put)
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## Key Conditions / Signals
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- Bullish outlook; expects stock to rise above K2 toward K3
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- Ideally zero-cost (H = 0): the short put premium finances the bull call spread
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- Short put at K1 creates downside exposure below K1
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## Notes
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The seagull spread's name comes from its payoff diagram shape. The upside is capped at K3 - K2 - H. The short put at K1 adds risk if the stock falls sharply, but at zero cost it provides a funded bullish position. Unlike the long combo, there is a defined maximum profit.
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